About
NFT and
Visual Arts
NFTs, or “Non-Fungible Tokens” are unique cryptocurrency tokens that are managed on the blockchain. You can imagine blockchain as a decentralized database that tracks the ownership and transaction history of each unique NFT. The main difference between NFTs and cryptocurrencies is if they are fungible or not - each cryptocurrency coin has the same value or use and is interchangeable. On the other hand, NFTs are coded to have unique IDs and other metadata that no other token can duplicate and are unique. This gives NFTs the attributes of rarity when they are connected with digital artwork or some other digital asset they carry.
NFT artworks are also called “crypto collectibles” because they can be bought and sold by collectors. NFTs have the potential to bring about a new era where creators can monetize their inspiring work, while it remains accessible to everyone else on the blockchain network.
Ownership of NFT artwork
When collectors buy artwork as an NFT, they buy a unique token representing the digital artwork. Ownership is then recorded in a tamper-proof way by the token and it uses blockchain technologies to keep track of provenance and ownership. NFT then works like an interactive trading card and it can be traded among collectors, rising in value in the process. As a creator or the artwork gains more admirers, the original collector can choose to resell it to another collector for a higher price. Great thing about NFT trading is that when the artwork is sold again, the creator gets a royalty fee (e.g. 1% of the sale price) from secondary transactions. For creators, this opens up a transformative market, where they can benefit financially when their artwork grows in value and changes hands.
Intellectual property
& Copyright
There is a critical difference from a legal perspective between ownership of NFT and ownership of the digital artwork from which the NFT was created (“minted”). When someone buys NFT tied to an artwork, they have not automatically purchased the underlying intellectual property rights. A copyright owner (usually artwork creator) has certain exclusive rights to reproduce, prepare derivative works of, perform, display, and distribute the copyrighted work. As a general rule, the purchase of a piece of art does not transfer all copyrights in such work to the buyer.
The underlying copyright only transfers from the copyright’s owner to the buyer if the copyright’s owner signifies in writing that they intend to transfer those rights alongside the copy of the artwork. Unless the NFT owner has received explicit permission from the seller, the NFT owner does not gain the legal right to reproduce the underlying artwork or to license third parties for commercial use (e.g. display it on third-party products, websites, or platforms). Absent further documentation, the buyer of NFT acquires through that purchase a non-exclusive license to display the related media in their token wallet for personal purposes only. Both sides to the sale of NFT should establish what rights are actually transferred with the sale of NFT. NFT seller can thus establish a common outline for all his NFTs in terms of what rights are actually being transferred or licensed to the buyer in such sale. The provided license can determine the allowed use of the NFT (e.g. to display the underlying art associated with the NFT) or commercial license (would allow it to use it for commercial purposes).
